11th Aug 2015 07:26
LONDON (Alliance News) - Just Retirement Group PLC and Partnership Assurance Group PLC on Tuesday said they have agreed to merge in an all-share deal to create a life insurance company worth almost GBP1.7 billion by market capitalisation.
The combination of the two companies is designed to create a stronger competitor in the defined benefit de-risking and UK retirement income markets. Known as specialist annuity providers, both Just Retirement and Partnership were rocked when new pensions rules in the UK removed the effective requirement on individuals to buy annuity products that guarantee income in retirement.
If the merger is allowed by authorities, the group wants to develop and roll-out new products to target customers under the new pensions freedoms given to them by the UK government. The companies expect to be able to save at least GBP40 million before tax per year by merging, with the full run-rate to be achieved in 2018. The deal is expected to create a company with GBP1.8 billion of new business sales and a market capitalisation of about GBP1.66 billion.
The combined entity intends to ask investors for about GBP150 million in an equity fundraising, which is to support integration and transactions costs, ready them for new EU Solvency II insurance regulations and support growth and product development. The group will also consider going to the debt capital markets.
The deal values Partnership Assurance at about GBP668.5 million, equivalent to 166 pence per share, which together Just Retirement's closing market capitalisation of GBP995 million on Monday gives the expected value of the combined group, which will be named JRP Group PLC.
Just Retirement shares were up 4.2% at 207.10 pence on Tuesday morning, while Partnership shares were up 9.4% at 168.75p.
Investors will receive 0.834 new Just Retirement shares for each Partnership Assurance share they already own. Just Retirement shareholders will own about 60% of the combined group, without taking into consideration the planned equity raising, with Partnership Assurance shareholders holding the remainder.
Rodney Cook, Just Retirement's chief executive, will retain that role and lead the combined group, while Partnership CEO Steve Groves will step down on completion of the deal. Chris Gibson-Smith, the chairman of Partnership Assurance, will chair JRP.
"Both businesses have at their core a focus on using outstanding intellectual property and underwriting expertise to deliver better value products and improved customer outcomes within defined benefit, UK retail retirement income and international markets," Chris Gibson-Smith, Partnership Assurance's chairman, said in a statement.
Just Retirement Chairman Tom Cross Brown said: "This transaction represents a unique opportunity to accelerate the existing strategy of both businesses. Our two businesses will be bigger, stronger and more efficient together, which we believe will allow us to deliver better returns to both policyholders and shareholders."
By Samuel Agini; [email protected]; @samuelagini
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